BUSINESS ETHICS AND CORPORATION OF NIKE

1. This is an individual project.

1. Choose  a company from below:

I have choosen

1. Nike – Child labour

1. Explain in your own words what is the meaning of CSR?

1. Explain in your own words Carroll model on CSR.

1. Write a report about the situation.  Include:

1. Brief summary detailing what happened in this situation.
2. Analyze the company’s response or reaction to the event  and stakeholders using Carrolls model.  Did the company behave in an ethical manner or not?
3. Did the company behave in an ethical manner or not? Explain
4. What would you have done differently?
5. What has the company done since to become more CSR
5. You need to submit your report by SafeAssign by the deadline.

The report should be 1000-1250  words. You must HCT formatting guidelines.

SOLUTION

Introduction- CSR

Till 1977, less than half the Fortune 500 firms even mentioned CSR in their annual reports. But by the end of 1990s, close to 90% of Fortune 500 firms embraced CSR as an essential element in their organizational goal, and actively promoted their CSR activities in annual reports (Boli and Hartsuiker 2001). Also known as Corporate Citizenship, CSR is defined by Philip Kotler and Nancy Lee (2005) as “a commitment to improve community well being through discretionary business practices and contributions of corporate resources”. It is a code of conduct which governs the overall operations of an organization in four dimensions viz. economical, legal, ethical and social. It defines the obligation of the organization towards its stakeholders (employees, suppliers, vendors, community etc). Organizations have adopted innovative methods and practices to emphasize their intention and contributions towards society and environment. For eg , Coca Cola’s water stewardship commitment ensures efficient use of the resource and recycling and replenishment of water through rain water harvesting. In India, Johnson & Johnson helps in education and health welfare of girl child by partnering with Nandi foundation and K.C. Mahindra trust.

Companies differ in their opinion about the extent of embedding social responsibilities in their businesses and have various approaches prioritizing the welfare of the stakeholders. Philanthropic approach, the oldest form of corporate citizenship, includes giving financial donations to NGOs and other welfare organizations .This approach is originated from the conventional school of thought that business should concentrate on its economic goals. Contrary to this, the approach of integrating CSR methods into business practices ensures a more sustainable development. Another model of Creating Shared Value (Porter,M.E & Kramer,M.R 2006) proposed building a total social value proposition in the businesses. Model proposed by Archie B. Carroll (1991) which embraces all dimensions towards which an organization is responsible, has become the most widely accepted approach to CSR. This CSR pyramid model emphasizes that the economic and social goals are not incompatible trade-offs. Rather, they are integrated into the total business social responsibility which includes philanthropic, ethical, legal and economic responsibilities, however with varying magnitude of consideration The pyramid gives economic responsibility utmost priority for any business. Profit making by providing the goods and services to the society is the founding principal of any business entity and hence forms the base of this pyramid. Businesses are expected to adhere to certain laws and regulations thereby satisfying the legal responsibility. Following fair and socially acceptable practices in business forms the third layer of the Carroll pyramid and establishes that organizations embody such practices which reflect concern for all its stakeholders. Philanthropy, the fourth layer of the pyramid, describes voluntary involvement of organizations in social and communal welfare.

Carroll’s Pyramid of CSR

Nike And Child Labor Allegations

Nike, founded by Phillip Knight and Bill Bowerman in 1972, is one of the largest producers of sports goods and accessories in the world catering to more than 160 countries across the globe. Headquartered in Beaverton, Oregon, Nike portfolio boasts of brands like Cole Haan, Converse, Umbro and Hurley International. Nike has some of its manufacturing units in Indonesia, China, Taiwan, India, Thailand, Vietnam, Pakistan, Philippines and Malaysia. In 1996, Nike came was accused for employing child labor and sweatshops at extremely low compensations in third world countries. There were horrendous reports of abuse, inhuman working conditions and unjust behavior in these manufacturing units from all over the world.

·         In Pakistan, children of age 10 and below were found to be working in Nike factories. (The Independent/ UK 2001)

·         Women working in Indonesian factories for wages as low as 50cents per hour were verbally and physically abused by supervisors. (DailyMail, 2011) .

·         A Malaysian contract factory, Hytex was accused of unacceptable living conditions, withholding of workers’ passports and garnishing wages.(Transworld Business, 2008)

·         Nike was accused of turning a blind eye to the extremely low wages paid to the workers in their factories in the third world countries.

Nike claimed that job work is done by independent contractors and they are required to adhere to strict regulations with regards to age, compensation and working conditions but also agreed to the fact that these regulations are often overseen by the supervisors. Philip Knight, the company chairman said in a report published in The Independent/UK (October 20, 2001) “Our age standards are the highest in the world: 18 for footwear manufacturing, 16 for apparel and equipment, or local standards whenever they are higher. But in some countries (Bangladesh and Pakistan, for example) those standards are next to impossible to verify, when records of birth do not exist or can be easily forged “. The company in its process of building strong balance sheets and impressive brand failed to integrate ethics and responsibility towards stakeholders, employees in this case.

Alternate course of action

Nike majorly defaulted in addressing the employee welfare concern in its manufacturing units. It should have acted proactively instead of taking corrective actions. Company faltered in making the contractors adhering to the laid down code of conduct. There should have been a monitoring mechanism from the beginning and management should have sent strong message about non-adherence leading to costly repercussions. The company should have had whistle blower policies in place to let employees bring any misbehavior or unethical practice to the notice of the management.

Nike and CSR – Too Little Too Late?

Though the Company has taken corrective steps, they have been banished by many quarters of the industry and welfare organizations as unsubstantial for a company of such magnitude, global presence and brand value. Nike released its first CSR report in 2001 after being defamed as a synonym for corporate cruelty and villainy in mid 90s. Since then the Company has taken a road to corporate citizenship and social responsibilities more seriously. Some of the initiatives listed below illustrate Nike’s commitment that labor compliance, environmental sustainability and corporate responsibility have become integral to their organization across the globe.

·         Through product innovation and application of technology, Nike is committed to achieve its goal of Zero-discharge of hazardous chemicals associated with supply chain by 2020. (Nike 2011)

·         To improve the working conditions of its 800,000 workers in 130 manufacturing units in 46 countries, Nike has not only laid down a code of conduct but also has pulled together internal teams to enforce it and laid down auditing tools to adjudge the implementation and compliance.

·         Nike joined hands with (RED),Africa  for “Lace Up to Save Lives” initiative in 2009 to leverage the power of sports to educate people about HIV/AIDS and provide medication to those infected.

Nike is one of the most respected brands in the world of sports and athletics. The company has cleared past the mist of accusations through well-intended and consistent efforts of proving itself a good corporate citizen.

References

Boli, J. and Hartsuiker, D. (2001). World culture and transnational corporations: sketch of a project. Paper presented at the International Conference on Effects of and Responses to Globalization.

Dailymail, 13 Jul 2011. Nike workers kicked-slapped-verbally-abused in factories making Converse-line Indonesia.

Available at :http://www.dailymail.co.uk/news/article-2014325/Nike-workers-kicked-slapped-verbally-abused-factories-making-Converse-line-Indonesia.html [Accessed on 22 May 2012]

Kotler,P and Lee,N. 2005. Corporate Social Responsibility, Doing the most good for your company and your cause. John Wiley & Sons,NJ

Nike Inc. 2011. Available at :< http://nikego.com/media/pr/2011/08/17_zero_discharge.html> [Accessed on 22 May 2012]

Porter,M.E and Kramer,M.R 2006 . Strategy & Society: The Link between Competitive Advantage and Corporate Social Responsibility, HBR.

The Independent/UK ,October 20, 2001. ‘We Blew It’ Nike Admits to Mistakes Over Child Labor. Available at :< http://www.commondreams.org/headlines01/1020-01.htm> [Accessed on 22 May 2012]

Transworld Business, Aug 4, 2008. Nike-responds-to-allegations-of-malaysian-workers-rights-violations.

Available at :<http://business.transworld.net/8504/news/nike-responds-to-allegations-of-malaysian-workers-rights-violations/> [Accessed on 22 May 2012]

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